Legislative Update: Two Weeks & Counting

SEN. FRANZEN’S DEMAND WILL LIKELY LEAD TO SALES TAX INCREASE

With two weeks left in this legislative session, our local representatives are taking positions on bonding and state spending.  The bonding bill offers a unique opportunity to demand action on special interests.  DFL State Senator Melissa Franzen has taken advantage of this opportunity.

road-sign-808733__180.jpgSince bonding bills can directly impact Minnesota’s borrowing capacity, they require a three-fifths vote to approve. Passing a bonding bill will therefore require votes from both parties.  In late April, the Star Tribune reported that  Sen Melissa Franzen set her price for her vote to approve a final bonding bill.  She joined six other DFL senators, primarily from the metropolitan area, in demanding approval of $135 million in state funding for the Southwest Light-Rail Transit project. 

Franzen and the six DFL senators indicated that the funding could come from bonding, additional spending through a transportation bill, or through a metro-area sales tax.  Since this Light-Rail project offers negligible benefit to out-state residents, the most likely outcome of Franzen’s demand will be an increase in our local sales tax. 

Add increased sales tax to the increase in the gas tax that she also supports.

REPUBLICAN vs. DFL POSITIONS ON 2016 BONDING AND BUDGET SURPLUS

The DFL majority in the MN Senate is pushing for higher taxes and significantly higher debt.  Minnesota’s two-year budget is traditionally set during odd years.  In 2015, state government expenditures were passed to fit within projected annual revenue.  The even-year legislative session focuses on bonding bills, identifying longer-term expenditures that are funded through state borrowing.  This year, the legislators have the benefit of a projected annual budget surplus of $900 million, the result of higher tax rates imposed when the DFL had majorities in both houses.   The actions proposed by Republicans and DFL leaders in the legislature are quite different.

Republicans feel the focus should be on road and bridge maintenance and on tax relief without raising taxes. 

  • House Republicans have targeted a $600 million bonding bill to address transportation needs in line with the debt incurred in previous years.
  • Republicans would spend a significant portion of the budget surplus on road and bridge maintenance. 
  • Much of the rest would go for tax relief.

Rather than re-prioritize spending in line with previous budgets, the DFL want to significantly increase spending through greater state borrowing and a higher gas tax.    

  • Gov. Dayton originally put forth a $1,000 million bonding bill.
  • The DFL-controlled Senate proposed a massive public works bill requiring $1,500 million in new debt.
  • The DFL majority rejected a Senate Republican compromise offer to approve a stripped down $1,000 million version.
  • Rather than prioritize the spending of the budget surplus on road and bridge projects, the DFL prioritized spending on new or expanded government programs.

Let’s put the Senate DFL bonding bill in perspective.  Minnesota had to set aside $1.5 billion in the latest two-year budget (2015-2016) to pay off our debts on previously-approved capital investment projects.

  • In 2010, annual debt service payments from Minnesota’s General Fund totaled $450 million. Today, Minnesota spends $750 million a year. This growth places it among the fastest growing categories in the General Fund budget.
  • The average size of the bonding bill in the past 10 even-numbered years is $800 million. The DFL bonding bill is double the average, further increasing the annual debt service obligation.

 

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